Poland has been center of attention throughout Europe ever since the parliamentary elections in the end of October 2015. After eight years as a ruling party it was time for Civic Platform (PO) to step aside and hand over the rule to far-right Law and Justice (PiS).
Currently Law and Justice has majority in both chambers of the parliament and in addition the current president Andrzej Duda was a member of the party until he resigned after elected as president. Previously Law and Justice was in power 2005-2007.
Similar one party, right wing domination has ruled Hungary for the past five years. Many rightly compare Poland’s Law and Justice to Viktor Orban’s Fidesz. Both parties are populistic, Eurosceptic, conservative and anti-immigration. The steps we have seen in Hungary seem to be happening now in Poland – just with faster pace.
Changes already visible in Poland
We have seen change of the judges of constitutional court and more over passing laws that makes it difficult for constitutional court to overrule any new bills – and therefore to check the government. Top managers of state owned companies have been changed and most recently, the management of public television and radio, have been dismissed. Naturally all this is not happening without opposition. Tens of thousands of people have marched in demonstrations against new government policies.
The key question for many is, that how the political changes will affect the economy and businesses? GDP growth in 2016 is estimated to be in the level of 2015 or even higher, around 3.5-3.7%. However, new government is planning for example a so-called bank tax and a tax from the large retailers, which combined should bring government more than 7 billion PLN in course of 2016. On the other hand plans to lower VAT form 23% to 22% have been dropped. Currently all the effects these reforms will bring to economy or companies operating in Poland are impossible to identify.
Markets & rankings
Markets seem to be reacting to reforms: Warsaw stock exchange hit its all-time high in May 2015 and since then, the Poland WIG index has dropped 23% to the level of 2013. Always important zloty-euro currency rate has also reacted as zloty has continued weakening against euro. This is especially interesting as it was forecasted to do vice versa still during the first part of 2015. Naturally market reactions are not solely due to reforms, but give interesting perspective for observation in 2016.
In the World Bank’s “Ease of doing business”-ranking Poland has improved for 2016. Poland is ranked as 25th as 2015 Poland was 28th In the ranking Germany is for example number 15 , Switzerland 26 and Czech Republic 36. Singapore is leading the ranking, but also Nordic countries have ranked well:
- Finland (10)
- Sweden (8)
- Norway (9)
- Denmark (3)
It is fair to say, that for Poland the true effects of new government and legislation will be seen only in next year’s rankings.
What is certain is that we have interesting year both politically and economically ahead of us. We will follow carefully both internal changes in Poland as well as macro economical changes, which affect businesses in Poland.